Annual Reports

 
Quarterly Reports

  • 10-Q (Oct 31, 2017)
  • 10-Q (Aug 3, 2017)
  • 10-Q (May 2, 2017)
  • 10-Q (Nov 2, 2016)
  • 10-Q (Aug 3, 2016)
  • 10-Q (May 4, 2016)

 
8-K

 
Other

Noble Energy 10-Q 2006

Documents found in this filing:

  1. 10-Q
  2. Ex-12.1
  3. Ex-31.1
  4. Ex-31.2
  5. Ex-32.1
  6. Ex-32.2
  7. Ex-32.2

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

ý  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2006

 

OR

 

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from       to      

 

Commission file number: 001-07964

 

NOBLE ENERGY, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

73-0785597

(State of incorporation)

 

(I.R.S. employer identification number)

 

 

 

100 Glenborough Drive, Suite 100

 

 

Houston, Texas

 

77067

(Address of principal executive offices)

 

(Zip Code)

 

(281) 872-3100

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý    No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ý

Accelerated filer o

Non-accelerated filer o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o    No ý

 

Number of shares of common stock outstanding as of April 28, 2006: 177,149,761

 

 



 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

Noble Energy, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share amounts)

 

 

 

(Unaudited)
March 31,

 

December 31,

 

 

 

2006

 

2005

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

135,950

 

$

110,321

 

Accounts receivable - trade, net

 

548,773

 

566,206

 

Derivative instruments

 

33,486

 

29,258

 

Materials and supplies inventories

 

47,335

 

33,802

 

Deferred income taxes

 

242,646

 

237,045

 

Prepaid expenses and other

 

46,742

 

56,568

 

Probable insurance claims

 

127,098

 

142,311

 

Total current assets

 

1,182,030

 

1,175,511

 

Property, plant and equipment, at cost:

 

 

 

 

 

Oil and gas mineral interests, equipment and facilities
(successful efforts method of accounting)

 

9,104,877

 

8,411,426

 

Other

 

72,123

 

69,869

 

 

 

9,177,000

 

8,481,295

 

Accumulated depreciation, depletion and amortization

 

(2,357,807

)

(2,282,379

)

Total property, plant and equipment, net

 

6,819,193

 

6,198,916

 

Equity method investments

 

404,607

 

420,362

 

Other assets

 

224,363

 

220,376

 

Goodwill

 

929,145

 

862,868

 

Total Assets

 

$

9,559,338

 

$

8,878,033

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable - trade

 

$

484,453

 

$

519,971

 

Derivative instruments

 

356,729

 

445,939

 

Income taxes

 

146,555

 

65,136

 

Asset retirement obligations

 

51,198

 

60,331

 

Accrued and other current liabilities

 

134,581

 

137,428

 

Interest payable

 

23,683

 

11,340

 

Short-term borrowings

 

25,000

 

 

Total current liabilities

 

1,222,199

 

1,240,145

 

Deferred income taxes

 

1,433,451

 

1,201,191

 

Asset retirement obligations

 

260,115

 

278,540

 

Derivative instruments

 

724,953

 

757,509

 

Deferred compensation liability

 

153,437

 

141,185

 

Other deferred credits and noncurrent liabilities

 

141,407

 

138,786

 

Long-term debt

 

2,140,603

 

2,030,533

 

Total Liabilities

 

6,076,165

 

5,787,889

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

Preferred stock - par value $1.00; 4,000,000 shares authorized, none issued

 

 

 

Common stock - par value $3.33 1/3; 250,000,000 shares authorized;
186,071,451 and 184,893,510 shares issued, respectively

 

620,238

 

616,311

 

Capital in excess of par value

 

1,967,511

 

1,945,239

 

Deferred compensation

 

 

(5,288

)

Accumulated other comprehensive loss

 

(652,927

)

(783,499

)

Treasury stock, at cost: 8,855,932 and 9,268,932 shares, respectively

 

(134,667

)

(148,476

)

Retained earnings

 

1,683,018

 

1,465,857

 

Total Shareholders’ Equity

 

3,483,173

 

3,090,144

 

Total Liabilities and Shareholders’ Equity

 

$

9,559,338

 

$

8,878,033

 

 

The accompanying notes are an integral part of these financial statements

 

2



 

Noble Energy, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2006

 

2005

 

Revenues:

 

 

 

 

 

Oil and gas sales and royalties

 

$

646,252

 

$

315,244

 

Gathering, marketing and processing

 

8,183

 

11,483

 

Electricity sales

 

17,912

 

21,591

 

Income from equity method investments

 

39,650

 

19,894

 

Total Revenues

 

711,997

 

368,212

 

 

 

 

 

 

 

Costs and Expenses:

 

 

 

 

 

Oil and gas operations

 

62,602

 

32,680

 

Workovers and repairs

 

19,591

 

3,240

 

Production and ad valorem taxes

 

25,453

 

9,220

 

Transportation

 

5,061

 

3,668

 

Oil and gas exploration

 

32,022

 

23,657

 

Gathering, marketing and processing

 

5,502

 

8,237

 

Electricity generation

 

10,626

 

11,439

 

Depreciation, depletion and amortization

 

124,465

 

70,279

 

Selling, general and administrative

 

35,398

 

15,168

 

Accretion of discount on asset retirement obligations

 

3,318

 

2,551

 

Interest, net of capitalized interest

 

33,168

 

11,732

 

Deferred compensation adjustment

 

9,176

 

 

Other expense (income), net

 

(3,738

)

1,859

 

Total Costs and Expenses

 

362,644

 

193,730

 

 

 

 

 

 

 

Income Before Taxes

 

349,353

 

174,482

 

Income Tax Provision

 

123,266

 

64,514

 

Net Income

 

$

226,087

 

$

109,968

 

 

 

 

 

 

 

Earnings Per Share:

 

 

 

 

 

Basic

 

$

1.28

 

$

0.93

 

Diluted

 

$

1.26

 

$

0.92

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

Basic

 

176,136

 

118,166

 

Diluted

 

180,099

 

120,278

 

 

The accompanying notes are an integral part of these financial statements

 

3



 

Noble Energy, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2006

 

2005

 

Cash Flows from Operating Activities:

 

 

 

 

 

Net income

 

$

226,087

 

$

109,968

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation, depletion and amortization - oil and gas production

 

124,465

 

70,279

 

Depreciation, depletion and amortization - electricity generation

 

4,151

 

4,308

 

Dry hole expense

 

7,383

 

8,862

 

Amortization of unproved leasehold costs

 

5,491

 

4,904

 

Stock based compensation expense

 

3,154

 

526

 

Gain on disposal of assets

 

 

(1,276

)

Deferred income taxes

 

55,460

 

11,147

 

Accretion of discount on asset retirement obligations

 

3,318

 

2,551

 

Income from equity method investments

 

(39,650

)

(19,894

)

Dividends received from equity method investees

 

9,000

 

17,550

 

Deferred compensation adjustment

 

9,176

 

 

Loss on derivative instruments

 

30,686

 

2,643

 

Other

 

5,110

 

5,984

 

Changes in operating assets and liabilities, net of acquisition:

 

 

 

 

 

Decrease in accounts receivable

 

25,575

 

20,561

 

Increase in other current assets

 

(1,277

)

(23,816

)

Decrease (increase) in probable insurance claims

 

66,014

 

(3,515

)

Decrease in accounts payable

 

(42,843

)

(24,389

)

Increase in other current liabilities

 

36,209

 

18,132

 

Net Cash Provided by Operating Activities

 

527,509

 

204,525

 

 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

Additions to property, plant and equipment

 

(288,018

)

(131,639

)

U.S. Exploration acquisition, net of cash acquired

 

(412,257

)

 

Proceeds from sale of property, plant and equipment

 

 

320

 

Investments in equity method investees

 

 

(13,917

)

Distribution from equity method investee

 

47,023

 

1,305

 

Net Cash Used in Investing Activities

 

(653,252

)

(143,931

)

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

Exercise of stock options

 

20,236

 

9,058

 

Excess tax benefits from stock-based awards

 

5,062

 

 

Cash dividends paid

 

(8,926

)

(2,950

)

Proceeds from credit facilities

 

300,000

 

10,000

 

Repayment of credit facilities

 

(110,000

)

(74,931

)

Repayment of term loans

 

(80,000

)

 

Proceeds from short term borrowings

 

25,000

 

 

Net Cash Provided by (Used in) Financing Activities

 

151,372

 

(58,823

)

Increase in Cash and Cash Equivalents

 

25,629

 

1,771

 

Cash and Cash Equivalents at Beginning of Period

 

110,321

 

179,794

 

Cash and Cash Equivalents at End of Period

 

$

135,950

 

$

181,565

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

4



 

Noble Energy, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity

(in thousands)

(Unaudited)

 

 

 

Common
Stock

 

Capital in
Excess of
Par Value

 

Deferred
Compensation -
Restricted
Stock

 

Accumulated
Other
Comprehensive
Income (Loss)

 

Treasury
Stock
at Cost

 

Retained
Earnings

 

Total
Shareholders’
Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2006

 

$

616,311

 

$

1,945,239

 

$

(5,288

)

$

(783,499

)

$

(148,476

)

$

1,465,857

 

$

3,090,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

226,087

 

226,087

 

Adoption of SFAS No. 123(R)

 

 

(5,288

)

5,288

 

 

 

 

 

Stock-based compensation

 

 

3,154

 

 

 

 

 

3,154

 

Exercise of stock options

 

3,660

 

16,576

 

 

 

 

 

20,236

 

Tax benefits related to
exercise of stock options

 

 

5,062

 

 

 

 

 

5,062

 

Issuance of restricted stock

 

267

 

(267

)

 

 

 

 

 

Cash dividends ($0.05 per share)

 

 

 

 

 

 

(8,926

)

(8,926

)

Rabbi trust shares sold

 

 

3,035

 

 

 

13,809

 

 

16,844

 

Unrealized hedging gains

 

 

 

 

60,527

 

 

 

60,527

 

Hedges reclassified to net income

 

 

 

 

69,879

 

 

 

69,879

 

Other

 

 

 

 

166

 

 

 

166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2006

 

$

620,238

 

$

1,967,511

 

$

 

$

(652,927

)

$

(134,667

)

$

1,683,018

 

$

3,483,173

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2005

 

$

417,152

 

$

291,458

 

$

(1,671

)

$

(14,787

)

$

(75,956

)

$

843,792

 

$

1,459,988

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

109,968

 

109,968

 

Exercise of stock options

 

1,708

 

7,350

 

 

 

 

 

9,058

 

Tax benefits related to
exercise of stock options

 

 

2,750

 

 

 

 

 

2,750

 

Issuance of restricted stock

 

270

 

2,649

 

(2,919

)

 

 

 

 

Amortization of restricted stock

 

 

 

526

 

 

 

 

526

 

Cash dividends ($0.025 per share)

 

 

 

 

 

 

(2,951

)

(2,951

)

Unrealized hedging losses

 

 

 

 

(387,526

)

 

 

(387,526

)

Hedges reclassified to net income

 

 

 

 

9,081

 

 

 

9,081

 

Other

 

 

 

 

99

 

 

 

99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2005

 

$

419,130

 

$

304,207

 

$

(4,064

)

$

(393,133

)

$

(75,956

)

$

950,809

 

$

1,200,993

 

 

The accompanying notes are an integral part of these financial statements

 

5



 

Noble Energy, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2006

 

2005

 

 

 

 

 

 

 

Net income

 

$

226,087

 

$

109,968

 

Other comprehensive income (loss):

 

 

 

 

 

Unrealized gain (loss) on cash flow hedges:

 

 

 

 

 

Oil and gas cash flow hedges

 

93,119

 

(596,194

)

Less tax provision

 

(32,592

)

208,668

 

Less reclassification adjustment for amounts out of AOCL:

 

 

 

 

 

Oil and gas cash flow hedges

 

107,317

 

13,782

 

Less tax provision

 

(37,561

)

(4,824

)

Interest rate lock cash flow hedge

 

189

 

189

 

Less tax provision

 

(66

)

(66

)

Other

 

255

 

152

 

Less tax provision

 

(89

)

(53

)

 

 

 

 

 

 

Other comprehensive income (loss)

 

130,572

 

(378,346

)

 

 

 

 

 

 

Comprehensive income (loss)

 

$

356,659

 

$

(268,378

)

 

The accompanying notes are an integral part of these financial statements

 

6



 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1 - Organization and Nature of Operations

 

We are an independent energy company engaged, directly or through our subsidiaries, in the exploration, development, production and marketing of crude oil and natural gas. We have exploration, exploitation and production operations domestically and internationally. We operate throughout major basins in the United States including Colorado’s Wattenberg field, the Mid-continent region of western Oklahoma and the Texas Panhandle, the San Juan basin in New Mexico, the Gulf Coast and the Gulf of Mexico. In addition, we operate internationally in Equatorial Guinea, the Mediterranean Sea, Ecuador, the North Sea, China, Argentina and Suriname.

 

Purchase of U.S. Exploration Holdings, Inc. – On March 29, 2006, we purchased the common stock of U.S. Exploration Holdings, Inc. (“U.S. Exploration”), a privately held corporation located in Billings, Montana, for $412 million. U.S. Exploration’s reserves and production are located in the Wattenberg field of Colorado’s Denver-Julesburg (“D-J”) basin. See Note 3 - Acquisitions.

 

Patina Merger – On May 16, 2005, we completed a merger (the “Patina Merger”) with Patina Oil & Gas Corporation (“Patina”). Patina was an independent energy company engaged in the acquisition, development and exploitation of crude oil and natural gas properties within the continental United States. Patina’s properties and oil and gas reserves are principally located in relatively long-lived fields with established production histories. The properties are primarily concentrated in the Wattenberg field of Colorado’s D-J basin, the Mid-continent region of western Oklahoma and the Texas Panhandle, and the San Juan basin in New Mexico. See Note 3 - Acquisitions.

 

Note 2 - Basis of Presentation

 

Presentation – The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements at March 31, 2006 and December 31, 2005 and for the three months ended March 31, 2006 and 2005 contain all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of our financial position, results of operations and cash flows for such periods. Operating results for the three-month period ended March 31, 2006 are not necessarily indicative of the results that may be expected for the year ended December 31, 2006. Certain reclassifications of amounts previously reported have been made to conform to current year presentations. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our annual report on Form 10-K for the year ended December 31, 2005. Unless otherwise specified or the context otherwise requires, all references in these notes to “Noble Energy,” “we,” “us” or “our” are to Noble Energy, Inc. and its subsidiaries.

 

We have accounted for the purchase of U.S. Exploration and the Patina Merger in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations.”  As a result, our consolidated balance sheet at March 31, 2006 includes the assets and liabilities of U.S. Exploration as well as the assets and liabilities of Patina. Our consolidated balance sheet at December 31, 2005 includes only the assets and liabilities of Patina. Our consolidated statements of operations and statements of cash flows include financial results of U. S. Exploration after March 29, 2006 and financial results of Patina from May 16, 2005. See Note 3 - Acquisitions.

 

Common Stock Split – On August 17, 2005, our Board of Directors approved a two-for-one split of Noble Energy common stock that was effected in the form of a stock dividend. All share and per share data except par value have been adjusted to reflect the effect of the stock split for all periods presented.

 

7



 

Accounting for Stock-Based Compensation Through December 31, 2005, we accounted for our stock-based compensation plans under the intrinsic value recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and related Interpretations. As of January 1, 2006, we adopted SFAS No. 123(R), “Share-Based Payment” (“SFAS 123(R)”). SFAS 123(R) revised SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) and nullified APB 25 and its related implementation guidance. SFAS 123(R) requires companies to recognize in the statement of operations the grant-date fair value of stock options and other stock-based compensation issued to employees and is effective for interim or annual periods beginning January 1, 2006. The fair value is expensed over the requisite service period of the award. In accordance with the modified prospective transition method, prior period amounts have not been restated. See Note 4 – Stock-Based Compensation.

 

Note 3 - Acquisitions

 

Purchase of U.S. Exploration – On March 29, 2006, we closed on our agreement to purchase U.S. Exploration for a cash purchase price of $412 million. The total purchase price was allocated preliminarily to the assets acquired and the liabilities assumed based on fair values at the acquisition date as follows:

 

                  $383 million to proved oil and gas properties;

                  $119 million to unproved oil and gas properties;

                  $67 million to goodwill; and

                  $157 million to deferred income taxes.

 

Certain data necessary to complete the final purchase price allocation is not yet available, and includes, but is not limited to, final appraisals of assets acquired and liabilities assumed and final tax returns that provide the underlying tax bases of assets and liabilities. We expect to complete the purchase price allocation during the 12-month period following the acquisition date, during which time the preliminary allocation will be revised and goodwill will be adjusted, if necessary.

 

Merger with Patina Oil & Gas Corporation – On May 16, 2005, we completed the Patina Merger. We acquired the common stock of Patina for a total purchase price of approximately $4.9 billion, which was comprised primarily of cash and Noble Energy common stock, plus liabilities assumed. In exchange for Patina’s common stock and stock options held by Patina’s employees, we issued 55.7 million shares of stock valued at $1.7 billion, issued options valued at $104.9 million, paid $1.1 billion in cash to Patina shareholders and assumed debt of $610.5 million and deferred taxes of $1.1 billion. The total purchase price was allocated to the assets acquired and the liabilities assumed based on fair values at the merger date as follows:

 

                  $2.642 billion to proved oil and gas properties;

                  $1.068 billion to unproved oil and gas properties;

                  $878.3 million allocated to goodwill; and

                  $1.1 billion to deferred income taxes.

 

The amount of goodwill recorded in the Patina Merger has been reduced by a total of $15.7 million ($3.8 million during first quarter 2006) for tax benefits associated with the exercise of fully-vested stock options assumed in conjunction with the Merger.

 

 

8



 

Pro Forma Financial Information – The following pro forma condensed combined financial information for the three months ended March 31, 2005 was derived from the historical financial statements of Noble Energy and Patina and gives effect to the merger as if it had occurred on January 1, 2005. The pro forma condensed combined financial information has been included for comparative purposes with first quarter 2006 actual results (as included in our consolidated statements of operations) and is not necessarily indicative of the results that might have occurred had the merger taken place at the dates indicated and is not intended to be a projection of future results.

 

 

 

Three Months Ended
March 31,

 

 

 

2005

 

 

 

(in thousands,

 

 

 

except per share amounts)

 

 

 

 

 

Revenues

 

$

527,505

 

Net income

 

158,305

 

 

 

 

 

Earnings per share:

 

 

 

Basic

 

$

0.84

 

Diluted

 

0.81

 

 

Note 4 - Stock-Based Compensation

 

As discussed in Note 2 - Basis of Presentation, effective January 1, 2006, we adopted the fair value recognition provisions for stock-based awards granted to employees using the modified prospective application method provided by SFAS 123(R). Accordingly, prior period amounts have not been restated. SFAS 123(R) requires companies to recognize in the statement of operations the grant-date fair value of stock options and other stock-based compensation issued to employees and is effective for interim or annual periods beginning January 1, 2006.

 

The total stock-based compensation expense recognized for the cost of options and restricted stock during the three months ended March 31, 2006 was $3.2 million of which $2.9 million is included in selling, general and administrative expense and $0.3 million is included in exploration expense. The total stock-based compensation expense recognized for the cost of options and restricted stock during the three months ended March 31, 2005 was $0.5 million, which was included in selling, general and administrative expense. The tax benefit related to stock-based compensation expense was $1.1 million and $0.2 million during the three months ended March 31, 2006 and 2005. We recognize the expense of all stock-based awards on a straight-line basis over the employee’s requisite service period (generally the vesting period of the award).

 

As a result of adopting SFAS 123(R) on January 1, 2006, our income before income taxes for first quarter 2006 was $2.4 million lower and our net income for first quarter 2006 was $1.6 million lower than if we had continued to account for stock-based compensation under APB 25. Basic and diluted earnings per share for the three months ended March 31, 2006 were  $0.01 and $0.01 lower, respectively, than if we had continued to account for stock-based compensation under APB 25.

 

Prior to the adoption of SFAS 123(R), we presented tax benefits resulting from the exercise of stock-based compensation awards as cash flows from operating activities within our consolidated statements of cash flows. SFAS 123(R) requires the tax benefits in excess of the tax benefits associated with compensation cost recognized for those awards to be presented as cash flows from financing activities. The $5.1 million excess tax benefit from stock-based awards presented as cash flows from financing activities in first quarter 2006 would have been presented as cash flows from operating activities if we had continued to account for stock-based compensation under APB 25.

 

9



 

The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions of SFAS 123(R) to stock-based employee compensation in all periods presented. The actual and pro forma net income and earnings per share for the three months ended March 31, 2006 below are the same since we have adopted FAS 123(R) as of January 1, 2006. The 2006 amounts are presented for comparison to prior year.

 

 

 

Three Months Ended March 31,

 

 

 

2006

 

2005

 

 

 

Actual

 

Pro Forma

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

Net income, as reported

 

$

226,087

 

$

109,968

 

Add: Stock-based compensation cost recognized,
net of related tax effects

 

2,050

 

341

 

Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax effects

 

(2,050

)

(1,915

)

 

 

 

 

 

 

Pro forma net income

 

$

226,087

 

$

108,394

 

Earnings per share:

 

 

 

 

 

Basic - as reported

 

$

1.28

 

$

0.93

 

Basic - pro forma

 

$

1.28

 

$

0.92

 

Diluted - as reported

 

$

1.26

 

$

0.92

 

Diluted - pro forma

 

$

1.26

 

$

0.90

 

 

Our stock option and restricted stock plans and incentive plan are described below.

 

1992 Stock Option and Restricted Stock Plan

 

Under the Noble Energy, Inc. 1992 Stock Option and Restricted Stock Plan, as amended (the “1992 Plan”), the Compensation, Benefits and Stock Option Committee of the Board of Directors (the “Committee”) may grant stock options and award restricted stock to officers or other employees of Noble Energy and its subsidiaries. The maximum number of shares of common stock that may be issued under the 1992 Plan is 18,500,000 shares. At March 31, 2006, 8,926,894 shares of common stock were reserved for issuance, including 4,456,900 shares available for future grants and awards, under the 1992 Plan.

 

1992 Plan Stock Options Stock options are issued with an exercise price equal to the market price of Noble Energy common stock on the date of grant, and are subject to such other terms and conditions as may be determined by the Committee. Unless granted by the Committee for a shorter term, the options expire ten years from the grant date. Option grants generally vest 1/3 per year over a 3-year period.

 

1992 Plan Restricted Stock Restricted stock awards made under the 1992 Plan are subject to such restrictions, terms and conditions, including forfeitures, if any, as may be determined by the Committee. Restricted Stock awards generally vest over periods of one to three years.

 

2004 Long-Term Incentive Plan

 

Under the Noble Energy, Inc. 2004 Long-Term Incentive Plan (the “2004 LTIP”), the Committee may make incentive awards to key employees of Noble Energy and its subsidiaries. Incentive compensation is based upon the attainment of specific market and performance goals established by the Committee. Awards may be in the form of stock options or restricted stock or in the form of performance units or other incentive measurements providing for the payment of bonuses in cash, or in any combination thereof, as determined by the Committee in its discretion. Stock options granted and restricted stock awarded

 

10



 

under the 2004 LTIP are granted and awarded pursuant to the terms of the 1992 Plan. Our cash based performance units and/or cash based bonuses are accounted for under SFAS 5, “Accounting for Contingencies” and are excluded from the provisions of SFAS 123(R).

 

2005 Stock Plan for Non-Employee Directors

 

The 2005 Stock Plan for Non-Employee Directors of Noble Energy, Inc. (the “2005 Plan”) provides for grants of stock options and awards of restricted stock to non-employee directors of Noble Energy. The 2005 Plan superseded and replaced the 1988 Nonqualified Stock Option Plan for Non-Employee Directors. The total number of shares of common stock that may be issued under the 2005 Plan is 800,000. At March 31, 2006, 800,000 shares of common stock were reserved for issuance, including 715,180 shares available for future grants under the 2005 Plan.

 

2005 Plan Stock Options The 2005 Plan provides for the granting to a non-employee director of 11,200 stock options on the date of election to the Board of Directors, annual grants of 2,800 options on February 1 of each year, and discretionary grants by the Board of Directors (up to a maximum of 11,200 options granted in any one year). Options are issued with an exercise price equal to the market price of Noble Energy common stock on the date of grant and may be exercised one year after the date of grant. The options expire ten years from the date of grant.

 

2005 Plan Restricted Stock The 2005 Plan also provides for the granting to a non-employee director of 4,800 shares of restricted stock on the date of election to the Board of Directors, annual awards of 1,200 shares of restricted stock on February 1 of each year, and discretionary grants by the Board of Directors (up to a maximum of 4,800 shares of restricted stock awarded in any one year). Restricted stock is restricted for a period of at least one year from the date of grant.

 

1988 Nonqualified Stock Option Plan

 

The 1988 Nonqualified Stock Option Plan for Non-Employee Directors of Noble Energy, Inc., as amended, (the “1988 Plan”) provided for the issuance of stock options to non-employee directors of Noble Energy. The options may be exercised one year after grant and expire ten years from the grant date. The 1988 Plan provided for the granting of a fixed number of stock options to each non-employee director annually (10,000 stock options for the first calendar year of service and 5,000 stock options for each year thereafter) on February 1 of each year. The 1988 Plan was terminated in 2005.

 

Stock Option Awards

 

The fair value of each option award was estimated on the date of grant using a Black-Scholes-Merton option valuation model that uses the assumptions noted in the following table. The expected term represents the period of time that options granted are expected to be outstanding. The hypothetical midpoint scenario we use considers the actual exercise and post-vesting cancellation history of stock based compensation historical trends to develop expectations for future periods. Expected volatility represents the extent to which our stock price is expected to fluctuate between now and the anticipated term of the award. We used the historical volatility of Noble Energy common stock for the 5.5-year period ended prior to the date of grant. The risk-free rate is based on a weighting of five and seven year U.S. Treasury securities as of the year ended prior to the date of grant to arrive at an approximated 5.5-year risk free rate of return which was determined to be 4.72%. The dividend yield represents the value of our stock’s annualized dividend as compared to our stock’s average price for the three-year period ended prior to the date of grant. It is calculated by dividing one full year of our expected dividends by our average stock price over the three-year period ended prior to the date of grant.

 

11



 

 

Black-Scholes-Merton Assumptions

 

2006 Grants

 

 

 

 

 

Expected term (in years)

 

5.5

 

Expected volatility

 

31.79

%

Risk-free rate

 

4.72

%

Dividend yield

 

0.76

%

 

A summary of option activity for the three months ended March 31, 2006 follows:

 

 

 

Options

 

Weighted
Average
Exercise
Price

 

Weighted
Average
Remaining
Contractual
Term

 

Aggregate
Intrinsic
Value

 

 

 

 

 

 

 

(years)

 

(in thousands)

 

Outstanding at December 31, 2005

 

9,319,642

 

$

19.21

 

 

 

 

 

Granted

 

747,847

 

45.92

 

 

 

 

 

Exercised

 

(1,097,731

)

18.43

 

 

 

 

 

Forfeited

 

(16,129

)

37.09

 

 

 

 

 

Canceled / expired

 

 

 

 

 

 

 

Outstanding at March 31, 2006

 

8,953,629

 

$

21.51

 

4.5

 

$

199,081

 

Exercisable at March 31, 2006

 

7,559,536

 

$

18.45

 

3.7

 

$

191,214

 

 

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2006 and 2005 was $16.37 and $11.78, respectively. The total intrinsic value of options exercised during the three months ended March 31, 2006 and 2005 was $27.1 million and $7.9 million, respectively.

 

As of March 31, 2006, there was $16.3 million of total unrecognized compensation cost related to nonvested stock options granted under the Plans. That cost is expected to be recognized over a weighted-average period of 1.7 years.

 

Cash received from option exercises under all stock-based payment arrangements for the three months ended March 31, 2006 and 2005 was $20.2 million and $9.1 million, respectively. The actual tax benefit realized for the tax deductions from option exercise under all stock-based payment arrangements totaled $5.1 million and $2.8 million, respectively, for the three months ended March 31, 2006 and 2005.

 

We issue new shares of common stock to settle option exercises.

 

Restricted Stock Awards

 

Grants of service based restricted stock awards are valued at our common stock price at the date of grant. The fair value of market based restricted stock awards is estimated on the date of grant using a Monte Carlo valuation model that uses the assumptions in the following table. The Monte Carlo model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment. Expected volatility represents the extent to which our stock price is expected to fluctuate between now and the award’s anticipated term. We use the historical volatility of Noble Energy common stock for the three-year period ended prior to the date of grant. The risk-free rate is based on a three-year period from U.S. Treasury securities as of the year ended prior to the date of grant.

 

12



 

 

Monte Carlo Assumptions

 

2006 Grants

 

 

 

 

 

Number of simulations

 

100,000

 

Expected volatility

 

28.4

%

Risk-free rate

 

4.35

%

 

A summary of restricted stock activity for the three months ended March 31, 2006 follows:

 

 

 

Subject to
Service
Conditions

 

Weighted
Average
Grant Date
Fair Value

 

Subject to
Market
Conditions

 

Weighted
Average
Grant Date
Fair Value

 

 

 

(shares)

 

 

 

(shares)

 

 

 

Restricted Stock at December 31, 2005

 

123,246

 

$

33.79

 

133,515

 

$

23.60

 

Granted

 

11,039

 

45.10

 

70,563

 

39.51

 

Vested

 

 

 

 

 

Forfeited

 

 

 

(1,392

)

31.24

 

Restricted Stock at March 31, 2006

 

134,285

 

$

34.72

 

202,686

 

$

29.09

 

 

As of March 31, 2006, there was $7.5 million of total unrecognized compensation cost related to nonvested restricted stock awarded under the Plans. That cost is expected to be recognized over a weighted-average period of 1.5 years.

 

We issue new shares of common stock to settle restricted stock grants.

 

Note 5 - Derivative Instruments and Hedging Activities

 

Cash Flow Hedges – We use various derivative instruments in connection with anticipated crude oil and natural gas sales to minimize the impact of product price fluctuations. Such instruments include variable to fixed price swaps and costless collars. Although these derivative instruments expose us to credit risk, we monitor the creditworthiness of our counterparties and management believes that losses from nonperformance are unlikely to be significant. However, we are not able to predict sudden changes in the creditworthiness of our counterparties.

 

We account for derivative instruments and hedging activities in accordance with SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, and have elected to designate our derivative instruments as cash flow hedges. Derivative instruments designated as cash flow hedges are reflected at fair value on our consolidated balance sheets. Changes in fair value, to the extent the hedge is effective, are reported in accumulated other comprehensive loss  (“AOCL”) until the forecasted transaction occurs. Gains and losses from such derivative instruments related to our crude oil and natural gas production and which qualify for hedge accounting treatment are recorded in oil and gas sales and royalties on our consolidated statements of operations upon sale of the associated products. We assess hedge effectiveness quarterly based on total changes in the derivative’s fair value. Any ineffective portion of the derivative instrument’s change in fair value is recognized immediately in other expense (income), net.

 

If it becomes probable that the hedging instrument is no longer highly effective, the hedging instrument loses hedge accounting treatment. All current mark-to-market gains and losses are recorded in earnings and all accumulated gains or losses recorded in AOCL related to the hedging instrument are also reclassified to earnings. As a result of the impacts of Hurricanes Katrina and Rita on the timing of forecasted production during first quarter 2006, derivative instruments hedging approximately 6,000 barrels per day of crude oil and 40,000 MMBtu per day of natural gas did not qualify for hedge accounting during a portion of first quarter 2006. Accordingly, the changes in fair value of these derivative contracts were

 

13



 

recognized in our results of operations, causing a mark-to-market gain of $39.2 million ($25.5 million, net of tax) in first quarter 2006. These derivative instruments were re-designated as cash flow hedges in February 2006. In addition, the delay in the timing of our production resulted in a loss of $25.4 million ($16.5 million, net of tax) related to amounts previously recorded in AOCL. Both the gain and the loss are included in other expense (income), net in the statement of operations. No other gains or losses were reclassified from AOCL into earnings as a result of the discontinuance of hedge accounting treatment during first quarter 2006 or 2005.

 

Derivative instrument activity related to our crude oil and natural gas production was as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2006

 

2005

 

Natural Gas Collars:

 

 

 

 

 

NYMEX -

 

 

 

 

 

Hedge MMBtupd

 

15,000

 

95,000

 

Floor price range

 

$5.00 - $5.00

 

$5.00 - $5.75

 

Ceiling price range

 

$8.00 - $8.00

 

$7.80 - $9.50

 

Percent of daily worldwide production

 

2

%

27

%

CIG (1) -

 

 

 

 

 

Hedge MMBtupd

 

3,444

 

 

Floor price range

 

$5.25 - $5.25

 

 

Ceiling price range

 

$10.20 - $10.20

 

 

Percent of daily worldwide production

 

1

%

 

 

 

 

 

 

 

Crude Oil Collars:

 

 

 

 

 

NYMEX -

 

 

 

 

 

Hedge Bpd

 

4,333

 

15,788

 

Floor price range

 

$29.00 - $60.00

 

$29.00 - $32.00

 

Ceiling price range

 

$35.50 - $73.80

 

$37.65 - $44.80

 

Percent of daily worldwide production

 

5

%

34

%

Brent -

 

 

 

 

 

Hedge Bpd

 

 

5,000

 

Floor price range

 

 

$37.50 - $37.50

 

Ceiling price range

 

 

$50.50 - $50.50

 

Percent of daily worldwide production

 

 

11

%

 

 

 

 

 

 

Natural Gas Swaps:

 

 

 

 

 

NYMEX -

 

 

 

 

 

Hedge MMBtupd

 

170,000

 

 

Average price per MMBtu

 

$

7.34

 

 

Percent of daily worldwide production

 

27

%

 

 

 

 

 

 

 

Crude Oil Swaps:

 

 

 

 

 

NYMEX -

 

 

 

 

 

Hedge Bpd

 

16,600

 

 

Average price per Bbl

 

$

41.17

 

 

Percent of daily worldwide production

 

21

%

 

 

 

 

 

 

 

Basis Swaps vs. NYMEX: (2)

 

 

 

 

 

CIG -

 

 

 

 

 

Hedge MMBtupd

 

24,111

 

 

Average differential per MMBtu

 

$

1.45

 

 


 

(1)

 

Colorado Interstate Gas

(2)

 

The basis swaps have been combined with NYMEX commodity swaps and designated as cash flow hedges.

 

14



 

For first quarter 2006 and 2005, oil and gas sales and royalties included losses related to cash flow hedges of $107.3 million and $13.8 million, respectively. Ineffectiveness losses related to cash flow hedges totaled $8.7 million and $2.6 million for first quarter 2006 and 2005, respectively and are included in other expense (income), net.

 

At March 31, 2006, we had entered into future costless collar transactions related to crude oil and natural gas production as follows:

 

 

 

Natural Gas

 

Crude Oil

 

 

 

 

 

Average price
per MMBtu

 

 

 

Average price
per Bbl

 

Production Period

 

MMBtupd

 

Floor

 

Ceiling

 

Bopd

 

Floor

 

Ceiling

 

April - December 2006 (NYMEX)

 

 

$

 

$

 

2,286

 

$

43.92

 

$

52.92

 

April - December 2006 (CIG)

 

10,000

 

5.25

 

10.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2007 (NYMEX)

 

 

 

 

2,700

 

60.00

 

74.30

 

2007 (CIG)

 

12,000

 

6.50

 

9.50

 

 

 

 

2007 (Brent)

 

 

 

 

6,748

 

45.00

 

70.63

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2008 (NYMEX)

 

 

 

 

3,100

 

60.00

 

72.40

 

2008 (CIG)

 

14,000

 

6.75

 

8.70

 

 

 

 

2008 (Brent)

 

 

 

 

4,066

 

45.00

 

66.52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2009 (NYMEX)

 

 

 

 

3,700

 

60.00

 

70.00

 

2009 (CIG)

 

15,000

 

6.00

 

9.90

 

 

 

 

2009 (Brent)

 

 

 

 

3,074

 

45.00

 

63.04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010 (NYMEX)

 

 

 

 

3,500

 

55.00

 

73.80

 

2010 (CIG)

 

15,000

 

6.25

 

8.10

 

 

 

 

 

At March 31, 2006, we had entered into future fixed price swap transactions related to crude oil and natural gas production as follows:

 

 

 

Natural Gas

 

Crude Oil

 

Production Period

 

MMBtupd

 

Average Price
per MMBtu

 

Bopd

 

Average price
per Bbl

 

April - December 2006 (NYMEX) (1)

 

170,000

 

$

6.20

 

16,600

 

$

40.24

 

2007 (NYMEX)

 

170,000

 

6.04

 

17,100

 

39.19

 

2008 (NYMEX)

 

170,000

 

5.67

 

16,500

 

38.23

 

 


(1)

 

Includes derivative instruments of 40,000 MMBtupd of natural gas and 6,000 Bopd of crude oil that did not qualify for hedge accounting treatment at December 31, 2005. These derivative instruments were re-designated as cash flow hedges in February 2006.

 

At March 31, 2006, we had entered into basis swap (CIG vs. NYMEX) transactions related to natural gas production. These basis swaps have been combined with NYMEX commodity swaps and designated as cash flow hedges. The basis swaps are as follows:

 

 

 

Natural Gas

 

Production Period

 

MMBtupd

 

Average
Differential
per MMBtu

 

April - December 2006 (CIG vs. NYMEX)

 

70,000

 

$

1.45

 

 

15



 

If commodity prices were to stay the same as they were at March 31, 2006, approximately $172.6 million of deferred losses, net of taxes, related to the fair values of the derivative instruments included in AOCL at March 31, 2006 would be reversed during the next twelve months as the forecasted transactions occur, and settlements would be recorded as a reduction in oil and gas sales and royalties. All forecasted transactions currently being hedged are expected to occur by December 2010.

 

The fair value of derivative instruments included in the consolidated balance sheets is as follows:

 

 

 

March 31,
2006

 

December 31,
2005

 

 

 

(in thousands)

 

 

 

 

 

 

 

Derivative instruments (current asset)

 

$

33,486

 

$

29,258

 

Derivative instruments (long-term asset)

 

$

49,135

 

$

17,259

 

Derivative instruments (current liability)

 

$

(356,729

)

$

(445,939

)

Derivative instruments (long-term liability)

 

$

(724,953

)

$

(757,509

)

 

Other Derivative Instruments – We also use various derivative instruments in connection with our purchases and sales of third-party production to lock in profits or limit exposure to natural gas price risk. Most of the purchases are made on an index basis. However, purchasers in the markets in which we sell often require fixed or NYMEX-related pricing. We may use a derivative instrument to convert the fixed or NYMEX sale to an index basis thereby determining the margin and minimizing the risk of price volatility.

 

We record gains and losses on these derivative instruments using mark-to-market accounting. Under this accounting method, the changes in the market value of outstanding financial instruments are recognized as gains or losses in the period of change. Net gains (losses) related to these derivative instruments  were de minimis for first quarter 2006 and 2005.

 

16



 

Note 6 - Employee Benefit Plans

 

Pension and Welfare Benefit Plans We have a noncontributory, tax-qualified defined benefit pension plan covering certain domestic employees. We also have an unfunded, nonqualified restoration plan that provides the pension plan formula benefits that cannot be provided by the pension plan because of the compensation and benefit limitations imposed on the pension plan by federal tax laws. We sponsor other plans for the benefit of our employees and retirees, which include health care and life insurance benefits.

 

Former Patina employees began participation in the defined benefit pension plan and the restoration plan on January 1, 2006, with vesting service from their original Patina hire date and credited service for benefit accruals starting January 1, 2006. Additionally, all former Patina employees were covered under the health care and life insurance plans effective January 1, 2006. Net periodic benefit cost related to pension and other postretirement benefit plans was as follows.

 

 

 

 

Retirement & Restoration
Plan Benefits

 

Medical & Life
Plan Benefits

 

 

 

2006

 

2005

 

2006

 

2005

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31:

 

 

 

 

 

 

 

 

 

Service cost

 

$

3,305

 

$

1,514

 

$

744

 

$

184

 

Interest cost

 

2,272

 

1,666

 

369

 

282

 

Expected return on plan assets

 

(1,963

)

(1,799

)

 

 

Transition obligation recognition

 

60

 

(54

)

 

60

 

Amortization of prior service cost

 

93

 

101

 

(59

)

(13

)

Recognized net actuarial loss

 

720

 

200

 

331

 

56

 

Net periodic benefit cost

 

$

4,487

 

$

1,628

 

$

1,385

 

$

569

 

 

Cash contributions of $2.2 million were made to the pension plan during April 2006.

 

Note 7 - Effect of Gulf Coast Hurricanes

 

Hurricane Ivan in 2004 and Hurricane Katrina in 2005 caused substantial damage to our Main Pass assets. As of March 31, 2006, based upon work completed, we have submitted $104 million (cumulative) in claims related to Hurricane Ivan damage, none of which has been disputed, and received $104 million (cumulative) in reimbursements. We have submitted $9 million (cumulative) in claims related to Hurricane Katrina damage, none of which has been disputed, and received $7.2 million (cumulative) in reimbursements. We expect to continue to incur costs, submit claims and receive reimbursements in the normal course of business in 2006 and beyond. During 2005, we were notified by our insurance carrier that its maximum exposure limit for losses incurred during Hurricane Katrina had been reached and that, consequently, our final insurance recovery will be limited. We have recorded probable insurance claims of $79.5 million, the estimated final recovery for losses sustained from Hurricane Katrina. Total Hurricane Katrina costs for clean-up and redevelopment are currently estimated at $170 million. There have been no significant changes in estimates for costs and insurance recoveries from 2005 year-end.

 

 

17



 

Assets (liabilities) related to the hurricane insurance recoveries and included in our consolidated balance sheets consist of the following:

 

 

 

March 31,
2006

 

December 31,
2005

 

 

 

(in thousands)

 

 

 

 

 

 

 

Probable insurance claims - current

 

$

127,098

 

$

142,311

 

Other assets (long-term portion of probable insurance claims)

 

62,000

 

112,800

 

Total Ivan and Katrina probable insurance claims

 

$

189,098

 

$

255,111

 

 

 

 

 

 

 

Asset retirement obligations - current

 

$

(36,793

)

$

(42,016

)

Asset retirement obligations - long-term

 

(103,000

)

(121,800

)

Total asset retirement obligations related to Main Pass assets

 

$

(139,793

)

$

(163,816

)

 

Note 8 - Asset Retirement Obligations

 

Asset retirement obligations consist primarily of estimated costs of dismantlement, removal, site reclamation and similar activities associated with our oil and gas properties. Changes in asset retirement obligations were as follows:

 

 

 

Three Months Ended
March 31, 2006

 

 

 

(in thousands)

 

 

 

 

 

Asset retirement obligations, beginning of period

 

$

338,871

 

Liabilities incurred in current period

 

1,838

 

Liabilities settled in current period

 

(33,898

)

Revisions

 

1,184

 

Accretion expense

 

3,318

 

Asset retirement obligations, end of period

 

$

311,313

 

 

 

 

 

Current portion

 

$

51,198

 

Noncurrent portion

 

260,115

 

 

The ending aggregate carrying amount includes $139.8 million, which we expect to be reimbursed by insurance, related to damage to the Main Pass assets caused by Hurricanes Ivan and Katrina in the Gulf of Mexico. Liabilities settled during the period were mainly related to clean up of hurricane damage at Main Pass.

 

18



 

Note 9 – Equity Method Investments

 

We have the following investments accounted for using the equity method:

 

                  45% interest in Atlantic Methanol Production Company, LLC (“AMPCO, LLC”) which owns and operates a methanol production facility and related facilities in Equatorial Guinea;

 

                  50% interests in AMPCO Marketing, LLC and AMPCO Services, LLC, which provide technical and consulting services; and

 

                  28% interest in Alba Plant, LLC which owns and operates an LPG processing plant.

 

Dividends and distributions received from equity method investees were $56 million and $18.9 million for the three months ended March 31, 2006 and 2005, respectively. Our investments in equity method investees are presented below:

 

 

 

March 31,
2006

 

December 31,
2005

 

 

 

(in thousands)

 

Equity method investments:

 

 

 

 

 

Atlantic Methanol Production Company, LLC

 

$

216,498

 

$

214,226

 

Alba Plant, LLC

 

176,419

 

195,109

 

AMPCO Marketing, LLC

 

9,668

 

9,014

 

AMPCO Services, LLC

 

2,022

 

2,013

 

Total equity method investments

 

$

404,607

 

$

420,362

 

 

Summarized, 100% combined financial statement information for our equity method investees is presented in the table below:

 

Balance Sheet Information

 

 

 

March 31,
2006

 

December 31,
2005

 

 

 

(in thousands)

 

 

 

 

 

 

 

Current assets

 

$

287,471

 

$

274,484

 

Noncurrent assets

 

858,466

 

877,402

 

Current liabilities

 

(199,189

)

(119,912

)

Noncurrent liabilities

 

(315,093

)

(450,156

)

 

Statements of Operations Information

 

 

 

Three Months Ended
March 31,

 

 

 

2006

 

2005

 

 

 

(in thousands)

 

Operating revenues

 

$

180,597

 

$

84,337

 

Gross margin

 

139,705

 

55,051

 

Net income

 

115,278

 

49,582

 

 

Our share of income taxes incurred directly by the equity method investees is reported in income from equity method investments and is not included in our income tax provision in the consolidated statements of operations.